What Is With This Chan Zuckerberg LLC Thing? Tax Geeks Speak

Mark Zuckerberg and his wife’s pledge to donate 99% of their Facebook shares during their lifetimes has met with frosty reserve in Germany, Britain and other parts of Europe where the company has a reputation for paying little tax.If you didn’t think it was possible for someone to be criticized for giving $45 billion to charitable causes, you must not know of this thing called Twitter. Concern that Zuckerberg was using philanthropy to avoid taxes echoed louder in European capitals than any admiration for his gesture to donate the shares — currently worth $45 billion — which was announced Tuesday via a letter to his newborn daughter Max.

At the time, he said it was for “advancing human potential” and “promoting equality.” That ambiguity has led to accusations that Zuckerberg may be dodging taxes or that his philanthropy ambitions may be restricted to furthering the Silicon Valley worldview, in contrast with the work of Bill and Melinda Gates’ nonprofit foundation. In Germany, one of the 10 most popular countries for Facebook with 22 million users as of 2014, there was skepticism about Zuckerberg’s pledge — and not only because donations for charity are rare and Germans tend to have a heavy reliance on the state. Zuckerberg explained in a follow-up post on Facebook why he chose to structure the initiative as a LLC, claiming it gives him and Chan flexibility on directing the flow of funding. Some has been critical, with particular emphasis on how the “Chan Zuckerberg Initiative” will be structured in a way that could reduce the couple’s tax bill (something Zuckerberg yesterday fought back against).

In his latest post, Zuckerberg has also identified development of clean energy, addressing “systematic issues around poverty and justice,” and improving and modernizing schools as other potential focal points for his investments. Many Germans, wary of individuals with too much power, would rather see the state distributing — and redistributing — wealth through tax collection and public expenditures than a tycoon dispersing his wealth as he sees fit. “Zuckerberg has so much wealth because Facebook uses tricks to evade taxes every day,” said Markus Preiss in a scathing commentary for Germany’s top-rated Tagesthemen news broadcast. “His company is actively taking away the financial basis from countries around the world, which he says he wants to make a better place, by paying so little tax,” Preiss said. “He’d do more to save the world if Facebook would simply pay its fair tax without the tricks.” Zuckerberg, who is the world’s 16th wealthiest person and America’s richest entrepreneur under 40, said in the letter that he and his wife, Priscilla Chan, wanted to help make a better world for their daughter and her generation. For everyone else, Zuckerberg explained that instead of going the traditional route of setting up a charitable trust or family foundation, he would gradually move his money into a limited liability company (LLC) that he would control. He’s already started on the first, having launched the Breakthrough Energy Coalition in partnership with Bill Gates to spur private sector investment. I’m barely cleaned up and you two are posting a family photo with an open letter, supposedly to me from you guys (and — just guessing — some lawyers, tax advisers and marketing suits). “Dear Max,” blah, blah, blah, “we love you,” blah, blah, blah, world problems, blah, blah, blah. “Continue to serve as Facebook’s CEO for many, many years.” Look, Dad … I assume it’s OK to call you “Dad.” “Mark” seems too familiar and “Mr.

Facebook, like other U.S. companies, bases its European operations in Ireland, where taxes have been traditionally low to lure companies from inside and outside the EU. All of which seemed to ignore that any financial advantage he might gain would fall billions short of what he’d save by, you know, not giving any of the money away. And those governments should get to spend it in line with whatever mandate they were given by their electorates.” Kajo Funke, a political scientist at Berlin’s Free University, said it’s commendable that Zuckerberg wants to donate most of his wealth, and he hopes that his intentions are genuine. “It’s a perfect fit — if the money is used for good causes,” Funke said. “I won’t join the ranks of those deriding him for this. The conservative Die Welt newspaper described Germans as notoriously envious of anyone who accumulates wealth and called it typical that so many are criticizing Zuckerberg’s philanthropy. “In Germany, every TV star, editor in chief or company executive learns that they’ll only face poisonous attacks and envy if they try to do something good,” wrote Die Welt. “So the hyper philanthropist is sadly going to remain an American phenomenon. As detailed in Dale Russakoff’s fine book “The Prize,” the gift was a nine-figure failure, a victim of the same bureaucratic and political ills it was supposed to fix.

Conservatives who complain about welfare tend to point to those who abuse the system or aren’t interested in using it in the way it was intended – to help people eventually help themselves. That’s what Zuckerberg seems to be trying this week, and instead of wondering what ill he might be up to, maybe we should admire the perseverance of giving he shows.